KUALA LUMPUR, Nov 18 — The expected tapering of US’s cash injection into the market will not cause a repeat of the 1997 Asian financial crisis, local investment expert Chen Fan Fai said today, noting that Malaysia is in a stronger financial position than it was at the time.

Chen said the economies of countries in the Asian region, including Malaysia, are now more robust and would be able to weather such a move by the US Federal Reserve.

“Tapering will have an impact but it won’t be like a crisis like the last Asian financial crisis, it won’t be that magnitude,” the Eastspring Investments Berhad chief investment officer told the media at a presentation of Malaysia’s market outlook.

He added that many Asian countries no longer have a current account deficit like they had during the crisis, and pointed out that their high foreign reserves now would help cushion the impact of the impending slowdown in quantitative easing by the US.

Although India and Indonesia currently run a current account deficit, both countries have very high foreign reserves, he said.

Chen compared Malaysia’s financial outlook in 1996 with the present, saying that back then, the county’s current account deficit staggered at 4.4 per cent of the Gross Domestic Product (GDP). Today, however, Malaysia’s current account stands at a surplus instead.

According to financial newswire Bloomberg last Friday, Malaysia’s current account surplus widened to RM10.7 billion in the third quarter from RM2.6 billion in the preceding three months.

The country’s foreign reserves have also surged, Chen noted.

As of October 31 this year, Malaysia’s foreign reserves stood at RM446.2 billion or USD 137.1 billion.

“If you look at the banking sector as a whole, our banks now are a lot better capitalised than what it was before,” Chen said, pointing to the country’s consolidation exercise after the 1997 crisis where banks were merged to strengthen the financial system.

“To say that this 1997 issue will rise again, I think that it’s a very low probability,” Chen said.

Robert Rountree, the global strategist of Eastspring Investments, said the argument that money was ‘flooding out of’ the Asian markets was ‘plain wrong’. — Picture by Saw Siow Feng

Robert Rountree, the global strategist of Eastspring Investments, stressed that the likely tapering of the US’s quantitative easing measures did not amount to a withdrawal of money from the market.

He also said that while the US and European Union appear to be scaling back, Japan had only started its quantitative easing programme, with the net effect of increased funds in the global market.

“If we look at the total result, you can see that the liquidity of the system is still continuing to rise and will rise next year,” he told the media when presenting the market outlook for Asia.

He said the argument that money was “flooding out of” the Asian markets was “plain wrong”, saying that investors were looking at long-term prospects in Asia.

“Even in Malaysia, we know there is a lot of investment in the pipeline that has yet to come on stream which could attract and investors just as it is in Philippines and Indonesia,” Rountree said.

Under the Economic Transformation Programme (ETP), the government has planned and announced various projects to drive Malaysia’s economic growth.

The US has yet to announce when it would cut down on its quantitative easing, but the expected move had spurred fears that money would flow out of developing markets such as those in Asia.